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Richard Alderman is the Director of United Kingdom Serious Fraud Office, an agency (here) similar to the U.S. Department of Justice and the primary U.K. enforcer of the Bribery Act (as well as the country’s prior bribery laws). Last week, Alderman gave three speeches in Washington and this post contains excerpts from those speeches. In his remarks Alderman touched upon the following topics: SFO resources, current workload and enforcement priorities; differences between how the UK and US investigate and prosecute bribery actions; WikiLeaks and the Arab Spring; the demand side of bribery; individual prosecutions under the Bribery Act; adequate procedures under the Bribery Act (“let me emphasize this is a complete defense, it is not a matter of mitigation”) and the SFO’s active engagement approach; and merger and acquisition issues (“society benefits if an ethical corporation takes over and sorts out a corporation that has corruption problems”).
Trace Forum 2011 (here)
“I shall talk a little later about the Bribery Act but let me tell you first a little more about what the SFO has been doing in order to justify the recognition of the UK as an active enforcer. We are a comparatively small office and we devote a considerable amount of that resource to dealing with anti-corruption. We have about 80 frontline staff dealing with anti-corruption with a resource for this of some $7.5 million. Our resource in the SFO is also a flexible one and we can move additional resource into anti-corruption from other areas depending upon workload. Currently, our anti-corruption workload is dominated by pre-Bribery Act cases. That is likely to remain for some time. We have about 50 corruption cases (whether involving the public sector or private sector) under formal investigation or prosecution and, of course, a number of additional ones that we are looking at to see whether we should open an investigation. Although these figures may look low in terms of the figures of some other authorities, it is important to understand quite what they mean. All of these cases are actually large complex anti-corruption investigations reaching across many countries and many individuals and companies. Under our system, we have to conduct every investigation to the standards required by our Criminal Justice System and with the possibility of a contested trial before Judge and Jury very much in mind. This means that each case is very resource intensive because we have to ensure that all evidence is obtained in the appropriate way and is admissible in court. The resource that goes into these cases is very great and is the source of great concern to me. ”
“Another feature of our cases that you do not have [in the U.S.] is the ability of those under investigation and indeed other parties such as non-governmental organisations to challenge anything that the SFO does. We saw that, for instance, in the BAE case where the decision to terminate the Saudi investigation was challenged by two non-governmental organisations. Any interested party (and that is construed very widely) can go to court and require the SFO to give an explanation to the satisfaction of the court about what we are doing. We need to show that our actions are lawful and proportionate. It is a very important discipline in my jurisdiction and we are at all times very conscious of this.”
“There are some particularly important issues under [the Bribery Act] for an audience based in the US. Let me talk first about the extended reach of the Bribery Act to foreign corporations that carry on business in the UK. We have received lots of questions about this and about the meaning of those very simple words “carrying on business in the UK. I know that there is the potential for much litigation on this issue. Nevertheless, I tell corporations that it will be very unwise of them to try to rely upon a very technical interpretation of the Bribery Act in order to persuade themselves that it is safe to carry on using bribery. I have said that they might be in for a very unpleasant surprise in a number of years time when our Supreme Court gives its views on this test. I say to corporations that the only safe way of doing business is not to use bribery.”
The Bribery Act has a new offence aimed at senior officers of corporations who consent to or connive in bribery. I know that there are many who are worried about this offence, particularly if they happen to be Directors or Non-Executive Directors based in the UK and where their companies are high risk. You may find, for example, that some London executive or non-executive directors may be worried about their exposure if US corporations are found to have been involved in corruption. We are actively looking for cases where we can apply this provision. Society expects senior members of a corporation to be responsible for ensuring that there is a true ethical culture. They have a key responsibility here. My view is that if they find that their efforts to do this meet with resistance or no success then they should consider resigning and telling us about their concerns. Expressing doubts about the company’s culture but remaining a highly paid officer would not be sensible because this would seem to be a model case of conniving in bribery for the purposes of the legislation.”
“Some cases may involve corruption under the old law. You will not be surprised, for example, to hear that we looking through Wikileaks and the other information becoming available as a result of the Arab Spring in order to see what corporations have been doing over a period of years. We are going to be very interested in the sorts of deals that are going to come to light and I am sure that this will be a fruitful source of work for us. The message from me is that if corporations are worrying about this, then they ought to come and talk to us now rather than wait for the dawn raid.”
Anti-Corruption Summit 2011 (here)
“What we have been doing is to encourage corporations to work together and with us and other authorities in order to try to work on the underlying problem. I have been very impressed by what a number of corporations have been doing. They come to me to tell me what they are doing because they are slightly nervous that the SFO will pick this up and may even start making enquiries or investigate. This is not what we want to do. If there is a genuine attempt being made to solve the problem of corruption then I want to let the corporations get on with that so far as possible and indeed to provide any help that I can in the SFO. We have had a number of discussions of this nature. I do not underestimate the difficulties here and the constraints. It appears to me though to be absolutely the right thing to do. This is because in my view one of the likely issues in the coming years is not going to be what we do about the supply side of bribery, but what happens about the demand side of bribery. It is an issue that I am concerned about in the SFO and one where I want us to contribute.”
“The Bribery Act creates a new offence at the corporate level of failing to prevent bribery. The defence to this is that there are adequate procedures to prevent that bribery. Let me emphasise that this is a complete defence. It is not a matter of mitigation. If an act of bribery occurs somewhere in your worldwide corporation and you had adequate procedures, then no criminal offence has been committed. This is something that has been reassuring to corporations. Of course what this means is that there has been great interest in the meaning of adequate procedures. The guidance from our Ministry of Justice sets out the UK Government’s approach to this in considerable and to my mind, helpful detail. Let me though give you a flavour of what you might expect if you came to us to talk about your adequate procedures. I should add here that many corporations do that. You may find this surprising but we do have a regular succession of corporations coming to the SFO to seek our views on their procedures and what they are doing. We stress that we can give no guarantee and certainly no certificate to the effect that their procedures are adequate but we are able to give them helpful advice. The feedback we get is that these are positive and pragmatic discussions. Some of the themes you will hear from us will be these. First, what is the approach of the most senior management in the corporation? They set the lead. Employees of corporations are very shrewd. They know what really matters to top management. They will know if something matters or does not matter. We will want to know therefore what top management is doing in order to ensure that the importance of good ethical business is known to every member of that company. We hear for example of contracts that corporations do not enter into because they could be secured only by corruption. This is a good practical example of the importance placed upon anti-corruption. There are others as well. We also want to know about risk assessment. This is something that corporations ought to be doing anyway but my own perception is that this has been intensified because of the Bribery Act. How do you assess the risks in your corporation? Is this simply a paper and routine exercise or is it genuine? It certainly ought to be genuine because this could bring down your corporation if you get it wrong and overlook some key risk. We will want therefore to talk through your risk assessment process. We shall of course be particularly interested if you find you have a considerable problem about something that was not flagged up in the risk assessment. This may or may not mean that the risk assessment process was flawed. We want to know what you are doing about this and indeed how you are developing the risk assessment process in future. We will offer any thoughts we have about any risks you should be thinking about but are not. What we will also want to be sure about is this. Please take it from me that simply handing us a large pile of documents with lots of boxes ticked on checklists will not be enough to satisfy us that you have adequate procedures. That is a paper exercise. It is part of what is needed but only part. We shall want to know what lies behind this and what the real issues are. Personally, I believe we are not alone in wanting to know this. When we are talking about corruption with all the reputational issues that are involved here, senior management should actually be asking exactly the same questions that the SFO will be asking in this respect. I have mentioned that corporations come and talk to us about all of these issues. Please feel free to contact us if you would find this helpful in order to talk through what you are doing. It is not a threatening process and please do not worry that if you came to us and expressed a few doubts about whether your procedures are adequate that you would find yourself on the wrong end of a prosecution before you left the SFO building. This simply does not happen. The object of these discussions is to be constructive and supportive. I hope you will find that if you approach us.”
“I want finally in this overview of what is happening, to talk about mergers and acquisitions. I know how important this subject is. Some time ago we said publicly in the SFO that we were prepared to assist corporations that were in the process of carrying out a merger or acquisition and discovered problems during the course of due diligence. We made this willingness clear about two years ago although I have to say that there was little take up at that stage. That seems to be changing now. I have been struck in recent months by the fact that a number of corporations have been to see us about some sensitive potential acquisitions where they are identifying some real issues about corruption during the course of due diligence. Ultimately, the decision about an acquisition is a commercial one and will involve an analysis of risk and reputation as well as many other issues. The corporation and its advisors though want to try to manage the regulatory risk so far as possible by seeking views from the SFO. We have been ready to engage in this. What we do is to talk to the corporation and its advisors about what they are finding and what they propose to do about it if the acquisition takes place. It is quite clear to me as a result of the discussions that a negative response from the SFO is sufficiently important to put the acquisition in jeopardy. On the other hand, a positive view from us on the basis of what the corporation intends to do could enable the acquisition to go ahead. My view on this, simply stated, is that society benefits if an ethical corporation takes over and sorts out a corporation that has corruption problems. It is something I am keen for the SFO to promote, so far as we legitimately can.
Risk Advisory Dinner (here)
“What we are trying to do with private sector corporations is to work on some real initiatives in particular countries and even particular areas such as ports in order to try to find ways of curbing the demand for these payments. This is not just a question of simply saying “no”; it is also a question of seeing what is the underlying problem (for example, public officials are not paid by the state and so are forced to demand bribes) and what can be done about these underlying causes. It is also a question of how we deal with governments and other authorities about these issues.”
“I have said publicly that a high priority for us will be to find a foreign corporation with a UK business presence that has got involved in corruption in another country and has undermined a good ethical UK corporation. Those corporations have been within the SFO’s reach since July 1st as a result of the new Bribery Act. An English jury will take the view that there is a very clear UK public interest in bringing such corporations to a criminal court. It is a high priority for us.”